Two weeks ago, Israeli army Unit 8200 former commander, Brig. Gen. (res.) Ehud Schneorson, announced a dramatic move. Having founded and sold cyberattack company Paragon for $900 million, which he had cofounded with former Prime Minister Ehud Barak, he was stepping down to launch a new startup called Ribon. Currently in its formative stages, Ribon focuses on developing sovereign cybersecurity systems for governments. The company, first revealed by "Globes," was incorporated in Israel only recently, though preparations for its founding have been underway for several months.
"Globes" has learned that in the lead-up to the company’s formation, cofounders Schneorson and Idan Nurick, together with Lieutenant Colonel "D" (a senior officer in a technological unit set to leave military service), secured investment commitments from a variety of backers. The funding round is structured in an unconventional manner by being divided into what the industry terms "tranches," each carrying a different valuation and led by different investors.
The first tranche, which values the company at $100 million, is led by Peter Thiel’s Founders Fund and former firm member Zach Frankel, an investor behind companies such as Cognition and Ramp. The second tranche, which values the company at $500 million, includes the same group of investors, joined by the Israeli-US venture capital firm Vine Ventures, founded by Eric Reiner. The third tranche, which values the company at $1.5 billion, is led by venture capital firm General Catalyst (GC), with participation from Vine Ventures. US venture capital giant Sequoia is leading the first round in Ribon through its new $10 billion fund.
The unique investment structure will inject $150-$200 million into the company, even before its formal founding, based solely on the reputation of its high-profile founders. Joining Nurick and Schneorson are several senior professionals who previously worked alongside them at Paragon, and before that, in Unit 8200: Assaf Sion, formerly a leading vulnerability researcher at Paragon, and Avior B, Paragon’s former VP research. Both left Paragon earlier this year, cofounded another startup, and have since moved on from that venture as well.
They are joined by another senior developer, who served with many of them in Unit 8200 and is currently stepping down at Wiz, as well as several other senior figures with backgrounds in military technology units. These include Lt. Col. D. (who also serves as a venture capitalist for Netz Capital and recently completed his military service) and two other senior professionals with experience in technological units: Omer Ehrlich and Gilad Maimon (who also comes from Wiz).
As far as is known, there is no precedent for a three-tiered funding round that assigns a $1.5 billion valuation to a company from the outset. This development strongly reflects the intense enthusiasm among major Silicon Valley venture capital funds for investing in Israeli cybersecurity companies, founded by serial entrepreneurs and veterans of elite technological military units, in an attempt to repeat the success of companies like Wiz and Armis.
Sovereign AI cloud system
Ribon, which recently opened offices on Elifelet Street in Tel Aviv, is developing a sovereign, AI-based cloud system designed for governments and state entities. In many respects, it introduces new competition for companies such as the US firm Palantir and Israeli company Dream, founded by Shalev Hulio, by providing software that allows governments to operate independently of external software vendors and third-party language model providers, such as OpenAI and Anthropic. Such a system requires the development of a secure, isolated cloud environment, along with the ability to utilize protected language models, without relying on the goodwill of commercial entities, or even of nations that might seek to boycott Israel.
Psagot Equity CEO Omer Yaniv explains the "tranche" mechanism (without specifically referencing the Ribon deal). He says, "Dividing a capital raise into segments, or 'tranches,’ allows a company to raise more capital, while enabling high-demand entrepreneurs to increase the company's valuation in line with that demand. This is a mechanism reserved for a select group of founders. One could assume that if an entrepreneur of Assaf Rappaport’s stature were raising funds for a new venture today, this is likely the mechanism he would use. In such companies, even before the first office chair is purchased, investors already foresee the potential for a multi-billion-dollar valuation."
Yaniv adds, "The first tranche essentially functions as a discount. In other words, the valuation in the third tranche likely represents the 'real' valuation, whereas investors in the first two tranches receive a significant discount."
"Tranches are a highly flexible tool that can be structured in many different ways," explains Altshare founder and CEO Ronen Solomon, a firm specializing in equity and option management. "It is possible to pre-schedule the transfer of funds, condition the investment on reaching specific milestones, or grant the investor discretion on further investment. In some deals, all terms including the valuation for each tranche, are determined upfront, while in others, the valuation is set at a later stage based on the company’s performance. Therefore, when it is said that a company has raised capital in tranches, one must first understand how the deal is structured."
"The tech landscape is shifting. We are seeing companies reach very high valuations, even as uncertainty regarding the future persists," observes Solomon. "Just as companies are evolving, venture capital funds must also adapt to this new reality. The 'tranche' model is part of this transformation. I anticipate that for companies struggling to raise capital, we will see tranches come with stricter terms and requirements to meet specific milestones. Conversely, for high-performing companies that attract competitive interest from investors, the terms may be more favorable."
Solomon also points to the inherent risks. "Suppose an investor commits today to investing in a company two years down the line, but the company fails to meet performance expectations. In such a scenario, questions may arise regarding the continuation of the investment and the pre-established commitments," he notes. "Therefore, it is crucial to distinguish between tranches where the funding is guaranteed, and those contingent upon meeting specific milestones or subject to the investor's discretion."
"Ultimately, each party has different interests," he concludes. "The entrepreneur seeks to secure future funding, while the investor aims to manage their own risks." In the case of highly sought-after companies, investors want to secure a spot for themselves in future Series B and C rounds, knowing that gaining entry later might prove more difficult. For less in-demand companies, the use of tranches allows funds to spread their risk rather than deploying all the capital upfront. It is a mechanism that addresses the needs of both parties, though its implications depend heavily on how the deal is structured.
Winners and losers
The primary beneficiaries of such a structure are the founders, most notably Nurick and Schneorson, who effectively lift the cloud of uncertainty and secure commitments from prominent investors, while maintaining the prospect of a high valuation. Similarly, Sequoia, Peter Thiel, and Zach Frankel gain entry into the company at a lower valuation, thereby increasing their potential upside.
General Catalyst, a prominent Silicon Valley venture capital firm with investments in companies such as Anthropic, Anduril, and Stripe, appears to have agreed to participate in the round, effectively betting on a higher future valuation. Furthermore, it is estimated that employees joining the company in the US who receive stock options may face a disadvantage. Due to local tax laws, the value of their options could be pegged to the company’s higher valuation, which would ultimately reduce their potential profit. Omer Yaniv adds, "In the US, under Section 409A, the exercise price cannot be lower than the fair market value of the common stock, determined via an independent valuation, and a high-valuation funding round typically drives this price upward. While no such requirement exists in Israel, many companies opt for a uniform exercise price to avoid creating a disparity between employees in Israel and those in the US, and to reduce exposure vis-à-vis the Israel Tax Authority. Companies wishing to preserve value for employees can compensate them by granting a larger number of options or by assisting them with the financing of the exercise."
Published by Globes, Israel business news - en.globes.co.il - on November 10, 2026.
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